Excess supply hits southern cement firms, India

01 September 2004

Lower price realisation has hit southern cement companies, as opposed to their northern counterparts, which have been thriving on higher exports. The revenues of southern companies have also been affected due to excess supply in the South, particularly in Andhra Pradesh. Even the three major southern players - India Cement, Madras Cement and Chettinad Cement - were affected by lower price realisation, as was evident from their first quarter results this fiscal.

India Cement, the leader in the South, could only improve its profit before interest, depreciation, and tax (PBIDT) by 17% at Rs 42.2 crore, compared to ACC’s and Gujarat Ambuja’s PBIDT at 25% (Rs 177 crore) and 30% (Rs 186 crore) respectively.

The sales of India Cement were marginally up by four per cent at Rs 263.1 crore, while that of Chettinad were up by 9% at Rs 99.5 crore. However, the turnover of Madras Cement was lower by five per cent at Rs175 crore.

In the North, on the other hand, the sales of ACC and Gujarat Ambuja were higher by 17% (Rs 941 crore) and 26% (Rs 595 crore) respectively.

Companies in the North were able to do better than their southern counterparts thanks to buoyancy on the price realisation front. Retail price in the North has improved by 12% at Rs 163 per bag of 50 kgs.

In the South, especially in Andhra Pradesh, there was a drop in wholesale price from Rs 142 per bag to Rs 135 per bag. The retail price dropped from Rs147 to Rs140.

"But the second quarter results are going to be good for southern companies, particularly India Cements, as the company has started its exports from Kakinada port.